FY27 debt-to-GDP target at 55.6%; nominal GDP growth pegged at 10%, Pg5

Key Highlights:

• The government aims to decrease the debt-to-GDP ratio to 55.6% in FY27 from 56.1% in FY26.
• Nominal GDP is projected to grow by 10% to Rs 393 lakh crore in FY27.
• The fiscal deficit target is set at 4.3% of GDP for FY27, amounting to Rs 16.96 lakh crore.
• Gross government borrowings are expected to rise to Rs 17.2 lakh crore in FY27 from Rs 14.61 lakh crore in FY26.

Detailed Insights:

• The shift to targeting the debt-to-GDP ratio comes after two decades of focusing on reducing the fiscal deficit.
• A lower debt-to-GDP ratio is expected to free up resources for priority sectors by reducing interest payments.
• The medium-term goal is to achieve a debt-to-GDP ratio of 49-51% by 2030-31.
• Global rating agencies like S&P, Moody's, and Fitch consider India's high public debt an obstacle to higher ratings.
• Maintaining fiscal prudence and gradual reduction of the fiscal deficit is intended to ensure steady economic growth.

Key Concepts Involved:

• Debt-to-GDP Ratio: The ratio of a country's total debt to its gross domestic product (GDP).
• Fiscal Deficit: The difference between the government's total revenue and its total expenditure.
• Nominal GDP: The gross domestic product (GDP) evaluated at current market prices.